The Montreal Gazette: Tech startups are flourishing in Montreal

MONTREAL, NOVEMBER 11, 2013 — Alain Wong brought the university students past long communal tables dotted with computers, where employees were typing away.

Wong, marketing manager for Wajam, a social media company, showed off the recreation room, where employees play darts, table hockey and games on an Xbox hooked up to a gigantic television.

This was more than just a tour of Wajam; Wong was giving insight into the life of a startup, young tech companies known for their explosive growth.

At one point, he gestured to a message in the comic book-like art decorating the walls: “Go big or go home.”

“That’s the startup industry, high risk, high reward,” he said.

The students were from McGill University, participating in Montreal’s first startup open house, an event to showcase the city’s youngest tech companies that attracted more than 1,200 visitors. The turnout was testament to the growing interest in startups, and to how much the burgeoning community has matured.

Had the organizers tried to put together an open house five years ago, it would have been difficult, if not impossible. Most of the 40 companies that participated in last month’s event, including the four visited by the McGill students, didn’t even exist.

The rapid growth of this community has been driven in part by broad cultural trends and above all by the efforts of local entrepreneurs.

Popular interest in startups has been increasing thanks to films like The Social Network and such shows as Dragon’s Den, which have made millions of people more familiar with entrepreneurship.

“It’s sexy to be an entrepreneur now,” said Gabriel Sundaram, one of the organizers of the open house.

There are also significant benefits to setting up shop in Montreal. Rents are cheaper than in other startup hubs. In Montreal, average monthly rent for a two-bedroom apartment was $719 at the end of April, whereas San Francisco’s average monthly rent for a two-bedroom unit was recently pegged at $3,015 U.S.

For entrepreneurs just starting out, high rents can be a tall hurdle when their focus is on building their product. And as many launch their businesses out of their apartments, cheaper rent could mean the difference between success and failure.

“Our costs would be much higher if we were in Toronto or Vancouver,” said Dax Dasilva, who began work on his startup, LightSpeed, in his Montreal studio apartment in 2005. Today, more than 15,000 retailers worldwide use LightSpeed, an inventory and sales management system for retail stores.

But it’s not just low rents that make the city attractive to aspiring entrepreneurs; Montreal’s universities, which turn out future developers and programmers, and the city’s high quality of life are also reasons to set up shop.

Dasilva said that helps companies like LightSpeed attract and retain talent. The company gives Bixi bike passes to its 100 employees in Montreal.

“You can make more progress as a company if you don’t have constant turnover,” said Dasilva.

The desire to retain staff also helps explain the Ping-Pong tables and video games one finds in many starutps. The city also has a great creative atmosphere that is mirrored in the culture of startups themselves, which are striving to rethink and invent new products and services. This is what attracts many people to work for startups.

At Wajam, employee Scott Usheroff told the visiting McGill students that he left his previous job at a large corporation to work in a startup because he wanted to be faced with fresh challenges.

“I was sick of working on a stagnant product,” he said.

He’s not alone. A year ago the company had 10 employees; today it has about 50, and Wong told the students that they were looking to hire more.

Even with Montreal’s advantageous rents and hip neighbourhoods, the mushrooming of startups around the city could not have taken place without entrepreneurs. In recent years they’ve been creating what entrepreneur Austin Hill calls “the intensity of density.” Meaning that there are more people engaged in startups, which means there’s more creativity and therefore greater chances of producing breakout successes.

Montreal’s entrepreneurs have steadily grown the pool of people interested in launching a startup or working for one through informal groups like Montreal NewTech, which organizes a monthly demo night where aspiring entrepreneurs can pitch their ideas before an audience of about 60 to 80 people, and newcomers can see what it’s about.

Felipe Coimbra, originally from Brazil, founded Montreal NewTech when he moved here in 2008 from the Silicon Valley. He had participated in similar events there, but they always charged an entry price. In contrast, Montreal NewTech demo nights are free, and often located in bar or pub.

When he moved to Montreal, members of the community tended to work in isolation, said Coimbra. But because of his persistent cajoling to get people to present, members of the broader tech startup community began to coalesce.

“The community became much more connected,” said Coimbra, who founded 63 Squares which helps businesses manage their online presence.

Five years later, newcomers still find demo nights a welcome introduction to the city’s tech scene. Adrian Teh, an immigrant from Malaysia, found a warm reception when he pitched his startup, HighRise Pro, a management system for condominiums, during a demo night in August.

“It was refreshing,” he said, adding that Montreal’s community was much more open and helpful to new entrepreneurs than the one back home.

Jean Sebastian Cournoyer, a partner at Real Ventures, an investment fund that has $55 million under management, said that groups and events like these help build the community and foster collaboration. They can even create breakthrough moments for entrepreneurs.

“What all these events do is they get people to talk about their project or business with other people who might be encountering similar problems,” he said. “They talk about their startup and other people say, ‘have you thought about this?’ ‘Have you talked to this guy?’ ‘Oh I’ll introduce you.’”

This collaborative spirit is typical of Montreal’s startup community. The organizers of the open house said that when they raised their idea with entrepreneurs, the response was overwhelmingly positive.

“I made 40 calls, and I got 40 yeses,” said Louis-Philippe Maurice, one of the four organizers and co-founder of Busbud, an Expedia-like website that sells bus tickets for over 4,000 cities in 70 countries. Busbud’s website was launched in January.

The community has also benefitted from the presence of FounderFuel, an accelerator program started by Real Ventures. FounderFuel helps young tech companies grow by providing training, access to mentors and $50,000 in funding in exchange for 9-per-cent equity in the company. Since it began in 2011, its 12-week-long program has graduated 37 companies. Larger companies have acquired three of its graduates, and four have shut down. But even failure can lead to success.

“Failure in our world is acceptable because it’s a learning experience,” said Ian Jeffrey, general manager of the program.

FounderFuel also invites investors, established entrepreneurs, and others – from Montreal and elsewhere – to participate in the program as mentors.

Montreal’s International Starutp Festival, held in the summer, has also helped increase visibility by bringing in entrepreneurs and investors from across Canada, the U.S. and elsewhere. The third edition, held in July, attracted about 3,500 participants.

“It’s our opportunity to showcase our community to the world,” said Philippe Telio, the festival’s founder.

Entrepreneur Austin Hill said that these kinds of groups and events have made it much easier for Canadian entrepreneurs to connect with one another.

When Hill became interested in entrepreneurship and startups in the 1990s, there were few places in Montreal to go to learn about it. “We used to joke that the best way to meet the best Canadian companies was to go to a conference in the U.S.,” he said.

Not only can they meet at any of these local events, but they can also meet at Notman House, which has hosted over 300 events since it opened its doors over two years ago, according to Alan MacIntosh, president of the OSMO foundation, the non-profit that operates the building.

The area north of Notman Houe, located on Sherbrooke, has become a magnet for startups. The 40 startups that participated in the open house are clustered along St. Laurent between Notman House and Mile End. That proximity helps foster collaboration.

“The way best practices and knowledge get shared is by speaking to one another,” MacIntosh said.

But for all this growth, Montreal is still lacking what some of the leading tech hubs have had: a big acquisition of a startup by a large company, sometimes called an exit.

Though there have been many small acquisitions, the city has not seen anything like New York-based Tumblr, which Yahoo! bought for $1.1 billion U.S. this year.

“If we get a big winner, it’ll validate what the community is doing. We need large exits to prove that the venture capitalist model works here. If you get that, then the wheel keeps turning,” said David Nault, an executive at Montreal-based venture capital fund iNovia, which has $275 million under management across three funds.

For the moment, it’s essential that the community keeps growing, entrepreneurs continue to launch new startups and more people get interested in joining one.

Events like the open house attended by the McGill students are helping keep up that momentum.

On their last stop at the successful startup Frank & Oak, the students saw first-hand how much potential Montreal’s startups have. The e-commerce site, which designs, manufactures and sells men’s apparel online, has grown from eight employees when it launched in February 2012 to 110 today. It has nearly one million users – about 70 percent are in the United States.

“It’s important that people understand that entrepreneurship is an option and it’s in reach,” Hicham Ratnani, co-founder of Frank & Oak, told the students.